Govt interest subsidy to go up 31.5 pc in FY12

New Delhi: The government on Monday said its interest subsidy outgo is projected to increase by 31.50 per cent in 2011-12 to Rs 6,868.47 crore.

The interest subsidy for the current fiscal was originally estimated at Rs 4,416.09 crore, but was later revised upward to Rs 5,223 crore.

Presenting the Budget for 2011-12, Finance Minister Pranab Mukherjee said the interest subsidy for providing short-term credit to farmers has been set at Rs 4,868 crore for the next fiscal, up 21.70 per cent from the revised estimate of Rs 4,000 crore in 2010-11.

Interest subsidy refers to the deduction of interest payments on debt owed by a firm from its earnings before taxes are calculated.

The interest subsidy for banks under the export promotion scheme has been fixed at Rs 1,000 crore for 2011-12, a growth of 52.91 per cent over the revised estimate of Rs 654 crore in the current fiscal.

Mukherjee also announced a Rs 500 crore interest subsidy for nodal agencies like the Reserve Bank and the National Housing Bank in 2011-12. This is a five-fold jump from the Rs 100 crore revised estimate for 2010-11.

The Budget for 2011-12 also increases the interest subsidy for LIC`s senior citizen pension plan by 13.61 per cent to Rs 199.61 crore from the 2010-11 revised estimate of Rs 175.70 crore.

The minister also announced interest equalisation support of Rs 139.69 crore for Exim Bank of India in the next fiscal, up 9.33 per cent from the revised estimate of 127.77 crore in the current fiscal.

However, the interest subsidy to Hindustan Steelworks Construction Ltd for implementation of its voluntary retirement scheme (VRS) has been reduced to Rs 46.90 crore for the next fiscal from the revised estimate of Rs 48.69 crore in 2010-11.

For another PSU — Hindustan Shipyard Ltd — it has been maintained static at Rs 40 crore. The interest subsidy to khadi industries have also been kept at Rs 22 crore for 2011-12, the same as the revised estimate for the current fiscal.

Furthermore, the Finance Minister announced the allocation of a Rs 2.38 crore interest subsidy for MECON Ltd, Rs 0.08 crore for Goan Bank, Rs 14 crore for bank finance to PSUs for implementing VRS, Rs 30 crore to cooperative sugar mills and Rs 5.36 crore to other village industries.